State of the Union: Interview With Jack Welch; Interview With Debbie Wasserman Schultz

Aired February 8, 2009 - 12:00 ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

JOHN KING, HOST: I'm John King and this is our STATE OF THE UNION report for Sunday, February 8th.

Nearly 600,000 people lost jobs in January. Is President Obama's plan enough to turn things around?

In the first Sunday interview with a member of the president's Cabinet, we'll hear from the transportation secretary, Ray LaHood.

After a week of partisan fighting, the Senate prepares to vote on an economic stimulus bill. We'll discuss its chances of passage with Democratic Senator Charles Schumer and Republican Senator Richard Shelby.

And is the nation's chief executive off to a good start? We'll get perspective on that and the economic mess from a mover and shaker in the corporate world, former General Electric CEO Jack Welch. All this and much, much more ahead on "State of the Union."

Striking a deal, late nights, and a rare Saturday session put the Senate on track to vote tomorrow and Tuesday on what supporters call a lifeline for America's ailing economy. The Senate stimulus package carries an $827 billion pricetag, and the compromise follows Friday's news that the nation experienced its worst job losses in 34 years. So will this plan pass and will it work?

Joining us in the first Sunday interview for any of the president's Cabinet secretaries is Transportation Secretary Ray LaHood.

(BEGIN VIDEOTAPE)

KING: Mr. Secretary, thank you for joining us on "State of the Union." I want to get straight to...

LAHOOD: Good morning.

KING: ... the kitchen table. Good morning to you, sir.

I want to get straight to the kitchen table accountability test. The American people are under a lot of pressure right now economically. They hear all these numbers being thrown around in Washington. If you get this money, set the standard for us, the accountability threshold right now. How many jobs and how fast? LAHOOD: A lot of jobs, John. And I've invited every secretary of transportation to Washington this Wednesday, that we're going to have a meeting at the Old EOB across from the White House. We're going to lay out for them what we believe are the opportunities for every state in the country to put people back to work on projects that are ready to go, by the book, no shortcuts. These projects really are projects that have been sitting on shelves all over the country, where states are waiting for the money. And this is an opportunity for every state in the country to bring to Washington a couple of examples of projects that they will be able to implement quickly, within the timeframes that are in the legislation, so that people will be building roads and bridges and other infrastructure projects this spring, summer and fall. And I believe an enormous number of people, thousands of people, will be going to work in good paying jobs.

KING: Well, Mr. Secretary, where do you draw the line in terms of what is stimulus spending and what is wasteful spending, maybe even a boondoggle? And I ask the question because the debate in Washington, you know, has been veered off track a little bit by legitimate concerns, many would say, about spending money on anti- smoking programs in this bill. Maybe a worthy goal, but why is it in this emergency recovery bill?

How do you draw the line between stimulus and maybe boondoggle? One mayor I talked to this past week, for example, says he wants to use some of this money to build a new wave pool in his community, with a water slide. He says it creates job. Is that the kind of project that passes your sniff test?

LAHOOD: Well, look, our criteria is going to be the criteria that we've used at the department for a long time, John. And, also, the money will be going to the governors and their state secretaries of transportation and highway administrators. And the one thing that the president has said all through this and set a very high bar -- no earmarks. The money has to go to projects that are ready to go in the states, and I just know that there are lots of these projects around, and we're going to learn a lot more about it next Wednesday.

And the point is, there aren't going to be any earmarks and there aren't going to be any boondoggles. This money will be spent correctly, by the book, with no shortcuts.

KING: Mayors think they should spend the money, not governors. We have turf battles in Washington between Democrats and Republicans. When you get out to the states, you know this well, it's the mayors and the governors sometimes at odds. Why do the governors have a better plan than the mayors? The mayors would tell you that they can get the shovels in the ground faster.

LAHOOD: Well, look, the bureaucracy is in place at the state level, John. The states have these departments of transportation, and they know how to meet the criteria that we have to set at the department so that the money is spent correctly, that people are put to work, that the projects are done according to the way that they are supposed to be done. Lots of cities -- some of the big cities, perhaps like Chicago or Boston or otherwise, you know, may have these kind of staff people in place. But for the most part, every state, all 50 states do have the mechanism and the bureaucracy to make sure that this is done by the book. And that is going to be something that -- go ahead.

KING: The word bureaucracy scares me a little bit, but we hope it works out and it's a good bureaucracy.

I want to get to a point -- I was in Carmel, Indiana this past week, talking to the mayor, and he says one of the ways to get the shovels in the ground faster is for you to use your executive authority here in Washington to change the rules, at least temporarily. As you know, there are environmental impact studies. There can be, you know, public comment and review periods at times. Listen to the mayor of Carmel, Indiana, Jim Brainard.

(BEGIN VIDEO CLIP)

MAYOR JIM BRAINARD (R), CARMEL, IN: Waive the rules. The rules for transportation projects that we normally have to deal with on the highway. Environmental impact statements, public comment periods, they slow it down. The absolute key is to get shovels in the ground as quickly as possible.

(END VIDEO CLIP)

KING: Mr. Secretary, will you and the president use your executive authority? As you know, that might anger environmental groups, that might anger labor unions, but is waiver to get these projects moving faster, is that the way to do this?

LAHOOD: Not at all. It really isn't. And it would be different if every one of these states didn't have projects.

You all know -- and I think that the viewers know -- that these states have had a pent-up demand for these projects to get funded and haven't had the local match to fund them, haven't had the ability to do it, because they haven't had the money to do it.

It's not as if we're going to be lacking for projects, John. There are lots of road, bridges, infrastructure that can be implemented immediately, within the timeframes that -- in the legislation, and put a lot of people to work in good paying jobs.

We don't need to waive anything. This is going to be done by the book, according to the rules, no shortcuts, no earmarks.

KING: Mr. Secretary, I'm going to stand up here in Washington and walk over to my magic wall. Because I was in your community last week. You're speaking to us from Peoria, an area you represented in the Congress for some time. When I was in your city right here in middle America, right along the river -- it is a beautiful city -- but it is struggling at the moment, like many factory towns. This is the floor of Caterpillar. You see these amazing tractors and earth-movers being made. Many of these workers, union workers, see the buy American provisions in the House version and the Senate version of this legislation, they think it sounds good, it sounds patriotic, but it might actually cost more of them their jobs. More than 20,000 have already been let go. Will your president fight to get that out of there? They say the buy American provision will cause a trade war, and they won't be able to export these tractors overseas.

LAHOOD: I think there is going to be a lot of discussion about the buy American provision in the conference. And I think you're going to see the president weigh in on this. And I haven't talked to the president directly about it, but...

KING: Is that an in or an out?

LAHOOD: ... his chief of staff -- I think there is going to be a lot of discussion about it, John.

KING: OK. Well, at least -- we'll leave that to that (ph).

I want to talk about your unique role in the administration. Just a few months ago, you were a Republican in the United States Congress. You were questioning many of the priorities of the Democrats who ran the United States Congress. You're now serving in the Democratic president's Cabinet. Every one of your former colleagues in the House, Republican House members, voted no. If Ray LaHood was still a Republican member of Congress from Peoria, Illinois, would you have joined them, sir, in voting no on the first stimulus package?

LAHOOD: Well, look, I didn't get elected to anything last November, John. I'm a part of the Obama team. I'm proud to be a part of President Obama's team. I consider it a great privilege that the president asked me to join his team. I'm going to do everything I can to help the president find the votes for the conference report once the Senate passes this. I'm going to work very hard next week. I'm going to work the phones. I am going to talk to my former colleagues, and do all that I can to persuade them that this bill really will put people to work.

KING: What about...

LAHOOD: America is hurting...

KING: What about in the first round, sir? Excuse for interrupting. Did the president call you and say, hey, Ray, we got a problem in the House? All your friends in the Republican conference are saying no? Can you pick up the phone? Can you work these guys? Or did you go to him and say, Mr. President, you've got a problem here?

LAHOOD: Well, it was a combination of both. The president asked me to go up with him to the Republican conference, and I was privileged to be able to do that. And I did make some phone calls. I talked to some people.

Obviously, I wasn't very persuasive, since I wasn't able to persuade anybody to vote for it. But, look, I've been talking to some senators when I've had the opportunity and I'm going to continue to do that for the next 10 days until this bill is passed.

And I think the conference report that will come out of the conference report that will be considered will be something that Republicans, some Republicans will look very carefully at.

KING: Mr. Secretary, we thank you for joining us on "State of the Union." We will keep in touch in the weeks and months ahead, and we will keep you accountable, make sure that money gets to the projects that create jobs in the short term. Thank you very much, sir.

LAHOOD: Appreciate it, John.

(END VIDEOTAPE)

KING: A compromise, of course, doesn't mean anything if the Senate can't reach agreement with the House and get a bill to the president's desk.

From putting Americans back to work to putting more money in your pockets. Does this deal have what it takes? We'll ask Republican Senator Richard Shelby and Democrat Chuck Schumer, next.

(COMMERCIAL BREAK)

KING: Welcome back to STATE OF THE UNION. A big week ahead for the president because there are two competing economic rescue plans before the Congress here in Washington. And President Obama wants a bill on his desk by the end of the week. First out of the House, $819 billion, an emphasis there more on government spending than on tax cuts.

Then a Senate compromised brokered Friday, $827 billion is the math on that package. A bit more in tax cuts to satisfy the few Republicans that Democrats absolutely need to get the votes in the Senate.

Where do we go from here? When will the president get a bill? Republican Senator Richard Shelby of Alabama and New York Democrat Charles Schumer join us now to discuss that.

(BEGIN VIDEOTAPE)

KING: Senator Schumer, let me start with you. The Democratic bill -- in your view, is it better than the House bill on the key test, creating jobs as soon as possible? or is it a lesser bill but one you had to agree to, simply to get the votes in the Senate?

SCHUMER: Well John, it's very close to the House bill. Overall, they overlap 90 percent. The overall number, $819 billion in the House; about $820 billion in the Senate, so that's a good mark. I believe that's where we're going to end up, at about $820 billion. And there are some differences. The House bill has a little more on education, a little less on tax cuts. I personally would favor the House bill. But the most important thing is that we are not going to let small differences stand in the way of passing this very strong bill, which the American economy desperately needs. To quibble over small, little things and let the bill go down would be a huge mistake for the American people, given the state of our economy and the need for a real shot in the arm.

KING: Well, Senator Shelby, I know you quibble with big things in this bill.

And I want to show you, just so that we get to you in Alabama. This is the Tuscaloosa News: "Stimulus Bill Debated in Rare Session." This is, of course, front page news, not only in your state, Senator Shelby, but around the country.

Is the compromise brokered in the Senate -- I know you don't like big things about this bill -- but is it better or did the input of those few Republicans who changed this bill make it worse?

SHELBY: Oh, I think it's -- it's similar to what Chuck Schumer said. It's close to the House bill. They tweaked it a little bit, but the substance is the same. It hadn't been changed much. It's not anything I could support.

And I would hope -- and I'm afraid we won't -- if the Republicans would stay together, we could shelf this bill and start again. That's what we really need to do.

KING: That's what we really need to do?

Now, we talk a lot, and we're going to talk about a cloture vote here in Washington. It's a word many Americans don't understand. It's a process in the Senate. We talk about billions and billions of dollars.

I want you both to listen. I was in Indiana, this week, talking to workers about this. I want you to listen, here, to the voice of a union auto worker who worries this bill may not help him out. Let's listen.

(BEGIN VIDEO CLIP)

KING (voice over): A General Motors plant in Indianapolis. KENDALL: I was tickled to death when I hired in here. I mean, I was working for the largest corporation in America. I mean, I was just on cloud nine.

KENDALL: Well, after a layoff they're fixing to have, there will be roughly 630 folks working. It's just snowballing into a massive, massive unemployment. And I don't think we've seen the end of it. I mean, all you've got to do is watch the news, and it's depressing. (END VIDEO CLIP)

KING: Senator Schumer, how does this legislation deal with that gentleman's concerns, 600,000 jobs lost in the economy last month; a million manufacturing jobs lost in the economy in the last year?

Mr. Kendall, there, thinks he could be next. In the next month or two, GM might say, you're out of work, after 18 years.

Is this bill short-term stimulus spending or does it do anything for the fundamental structural problems in the U.S. economy?

SCHUMER: Well, it does really help in this situation. We have the same situation in Buffalo and Syracuse auto plants, really hurting. People have worked hard their whole lives, worried about being laid off.

But in this bill, for instance, is a tax incentive to encourage people to buy cars. Just like you get the interest off when you have a mortgage for your home, off on your taxes, and it's an incentive to home ownership that's worked, we're trying the same thing. Barbara Mikulski spearheaded it, to do that for automobiles.

So there are things here that would help. In addition, if we pump money into the economy, if we employ people in construction jobs, if we make sure that teachers, for instance, are not laid off, then there will be more money in the economy, more people will buy cars, and the chances of this fine gentleman being laid off would decrease.

I'll tell you one thing for sure. To do nothing, to do nothing would certainly seal his fate. And that's why the American people, 65 to 70 percent of them, support President Obama's plan.

KING: So Senator Shelby, I want to talk a little bit more about the specifics, because I want you to be as specific as you can in telling us what you think is wrong with this plan. In the Senate bill, here are some of the provisions, $47 billion to provide extended unemployment benefits, $16.5 billion to increase food stamp benefits, $3 billion in temporary welfare payments, $17 billion so there can be a one-time $300 payment to people receiving Social Security or supplemental Social Security income and veterans on disability pensions. And $4.7 billion for homeland security programs.

Are those specifics OK with you, Senator Shelby, or are those among the provisions you think are unnecessary or unwarranted in this kind of bill?

SHELBY: Well, they've got merit to them, but I don't believe in this bill.

John, the bottom line is this bill, nearly $1 trillion before it's over with, is not going to turn around our economy that you mentioned earlier. The gentleman -- the auto worker understands that. He's got a lot of sense. He knows that stimulus bills generally are not going to save his job. Are there some merits to some of this? Some of the infrastructure is good. But are they -- is it emergency? Is it going to just flip our economy? No.

What we need to do, John, we've got to attack our banking system. We've got to bring trust back to our banking system. I hope the administration -- and they are working on this, and Senator Schumer and I will be in the middle of this on the Banking Committee. But until we straighten out our banking system, until there is trust in our banking system, until there's investment there, this economy is going to continue to tank.

(END VIDEOTAPE)

KING: Between that partisan brawl over the stimulus plan and tax troubles with his nominees, it's a fair question to ask, how well is the country's new chief executive running the business of America? We put that question to someone well respected in the corporate world, former CEO of General Electric, Jack Welch.

Plus, workers facing a frightening choice. Gamble on an uncertain future at their auto plant or take their chances in a very tough job market? Still ahead, stay with us.

(COMMERCIAL BREAK)

KING: I'm John King and this is the "State of the Union." Here are the top stories breaking this Sunday morning.

Iran's former reformist president says he'll challenge hard-liner Mahmoud Ahmadinejad in the June presidential election. Iranian media reported today that Mohammad Khatami has thrown his hat into the ring.

Khatami was Iran's president from 1997 through 2005. He's credited with relaxing some of the country's cultural and social restrictions.

President Obama's new bank bailout bill will likely be unveiled a day later than planned. That's the one on how to restructure the second half of the $700 billion in emergency relief to banks.

Today a top White House economic aide suggested the changes in that plan will be released on Tuesday, not Monday, that to allow Treasury officials to focus on the economic stimulus package.

And a Republican mayor from a conservative town, throwing his support behind President Obama and the stimulus bill. Find out why he thinks this plan is so critical for the country.

That and much, much more, ahead on "State of the Union."

Less than three weeks into office and the president already admits he's made some mistakes. At the same time, he looks to be headed for a win with the economic recovery plan.

If being president is like being the country's CEO, then our next guest knows a bit about the challenges Mr. Obama is facing. The former chairman and CEO of General Electric, Jack Welch -- he's also the author of a new book, and you can see it right there, "Winning."

Jack Welch joins us from New York.

Jack, thanks for joining us on "State of the Union" this morning.

WELCH: Thank you, John.

KING: I want to begin with a simple question. You're a CEO, widely respected in the business and corporate world. We're watching our new CEO, President Obama, of the United States.

And earlier this week, he had to go to the Oval Office, give five network television interviews to say, "I screwed up."

I want your early assessment. But first, let's listen to the president.

(BEGIN VIDEO CLIP)

OBAMA: I think this was a mistake. I think I screwed up. And, you know, I take responsibility for it. And we're going to make sure we fix it so it doesn't happen again.

A, why the mistake? What are we learning about him as a chief executive?

And, you know, it's tough when you have to go in and say, "I screwed up." How is he doing?

WELCH: Well, I think going and admitting that he had some problems -- candor always wins, John. And him coming out is very gratifying to a lot of us that get a lot of air from Washington.

So I think it was a hell of a good move.

KING: And when you watch him make decisions and then communicate them with the American people, as someone who has had to make the tough choices. Sometimes it's hiring new workers; sometimes it's laying off workers.

When you watch this president communicate as a leader, give us an early assessment.

WELCH: Well, it's a little too early. I can judge him from the campaign, where he was fantastic.

Monday night's a very big deal, John. He's got to go in there -- he's been using fear for the last few days. The country doesn't need fear. But he needed fear to rally the Congress behind this stimulus bill.

He's got to go in and balance confidence with fear. There's no question about that. He's got to give people a feeling that, I've got this thing under control; I know where it's going; it's going to be difficult, but I've got a great team here, and we can pull it off.

KING: One of the issues he has talked quite emphatically about is that any financial institution that takes taxpayer money as part of the bailout should cap the pay to its CEO at $500,000, the administration says; you can take some stock, maybe, down the road, but the president making the case that this is taxpayer money; there should be restrictions.

Again, let's listen to President Obama. (BEGIN VIDEO CLIP)

OBAMA: This is America. We don't disparage wealth. We don't begrudge anybody for achieving success. And we certainly believe that success should be rewarded. But what gets people upset, and rightfully so, are executives being rewarded for failure.

(END VIDEO CLIP)

KING: Jack Welch, i think you got a few bonuses when you were a CEO. Obviously, you weren't taking taxpayer money at the time; your company was not.

Is this a good idea? It's obviously populist. It's easy politics. But is this a good idea for the government to be setting pay limits on CEOS, even when there's taxpayer money involved?

WELCH: Look, obviously, you'd like it not to be this way, John. But I think the president showed a lot of restraint, a lot of balance.

He could have -- the country's mad. People are angry. And he made this thing perspective. He allowed them to put incentives in that they can't cash out until they pass us all back, as taxpayers.

I think, on balance, with the heat around the country, the anger everywhere -- you meet a cab driver; you meet somebody in a restaurant -- people are angry. They've all lost money, real money. And I think he walked the fine line. He threaded the needle, I'd say, in a very reasonable way.

KING: A lot of anxious workers might be out there watching this today. Maybe last week they were laid off; maybe, next month, they think they'll be laid off, and they want your perspective.

The unemployment rate -- I'm going to get up and walk over to the wall, as we talk. The national unemployment rate is 7.6 percent; $598,000, Jack, flushed out of the economy just last month; 207,000 manufacturing jobs lost in December, a million manufacturing jobs lost in the last year.

On our map, here, the hot states, yellow states are the 10 states with the highest unemployment rate. Jack Welch, I was out in Indiana this past week, one of those states. The unemployment rate is now in excess of 8 percent. We talked to some blue-collar auto workers in Indianapolis. I want you to hear their anxiety about the economy.

(BEGIN VIDEOTAPE)

KING (voice over): General Motors plant in Indianapolis.

JAMES KENDALL, GENERAL MOTORS EMPLOYEE: I was tickled to death when I hired in here. I mean, I was working for the largest corporation in America. I mean, I was just on cloud nine.

KENDALL: Well, after a layoff they're fixing to have, there will be roughly 630 folks working.

KING: Inside, on Friday, GM officials tried to sell those union workers on a buyout plan. The company says shrinking its workforce is critical to becoming more competitive.

Kendall will say no, as will Scott McMillin. Indianapolis is his third GM plant in the past 15 years. He has a daughter in college.

SCOTT MCMILLIN, GENERAL MOTORS EMPLOYEE: If I did retire now from General Motors, I would be looking for another job, and they're just not out there.

KING: But saying no is a gamble. Gm has talked of closing this plant altogether.

MCMILLIN: You just don't know. It's -- it's all a crap shoot. My dad worked for 27 years and retired from the foundry that I started in. His job was secure from day one. Nowadays, an auto worker is pretty much a modern day gypsy moving from plant to plant.

KENDALL: Well, well just -- I don't know. We'll see. If it don't work out here at this facility and there's nowhere else to go, I'll do what I have to do to get by.

It's just snowballing into a massive, massive unemployment. And I don't think we've seen the end of it. I mean, all you've got to do is watch the news, and it's depressing, really.

(END VIDEOTAPE)

KING: It is depressing, Jack Welch, to sit and talk with these workers. They're hard workers. They've been at the companies for years, and in some cases their dad and their grandfather worked there as well.

Help us understand what is happening to our economy and to people like that. It used to be, you got a job at one of those factories, you were good for life.

What is happening?

And in the context of that, nearly $1 trillion in stimulus spending -- the House plan is a little different from the Senate plan. Is that package going to help those auto workers or is it a Band-Aid?

WELCH: John, let me put some perspective, if I may. I managed through three recessions, '74, '75, '81-'83 and '90-'92. If you will, we knew in February, this week in February what our sales would be in April plus or minus a couple percent.

This one is different. Orders have crashed. There is no visibility. CEOs are as nervous as that good man in that plant is. They don't know what they're doing. So a lot of these actions could be overdone as they have no visibility as to what's happening and they're in a preservation mode for their companies.

Certainly a lot of small companies are really in that mode where they're not getting the credit and they need to take action and get costs down for survival. That's why I am so frustrated that we're spending all this time, every talk show today, all about stimulus.

The real issue is going to come when Monday Tim Geithner unveils the banking plan. If an economy doesn't have credit, we don't have a game. And we've got to get credit flowing. I know people are angry with the top and other things. But we have to get the -- what we're doing with the stimulus plan is we're buying a new wardrobe for a patient whose lying in cardiac arrest.

We have to take the operation which is the banks and get the blood flowing and the blood in this case is credit, John. Credit is the most important thing we deal with for that man's job and for CEOs getting some visibility as to where they're going.

KING: So let's talk about that. They're going to have a revised talk. That is the bailout plan for anybody outside of Washington or New York who doesn't get the language. They have $350 billion more to spend. And they made clear they have to come back for billions more down the road.

What can they do? Because when you go to those small towns, people think that money is not coming my way. And we're told that in this new plan, they say more transparency. They say more of a focus on housing to help the financial institutions. They also say no requirements that banks lend the money. Be treasury secretary for a minute. What would Jack Welch do?

WELCH: Jack Welch is not good enough and we have Geithner and we have Summers there to give us the perfect answer. I think that we've got to take these toxic assets and foreclosures and deal with both of them. In foreclosures, there are five suggestions out there. And I'm not sure which one is best. But we have to take action on that. We've got to stop the house price slide.

On the question of the toxic assets, I favor a guarantee or insurance plan keeping the assets on the banks books so the banks work them out. And I don't agree with forcing lending. We've done that before. And we end up with some of the mess we have.

I think you can't give people money and then say make a bad loan. But on the other hand, if we take these bad assets and put a backstop, we don't put cash in, we put a government guarantee behind it, we don't spend zillions of dollars until they go bad and we give incentives to the bankers to work it out, to get -- so they don't take those loans from us, those guarantees.

So, you know, I'm not the expert. We have -- the nice thing is we have two very good people here. I think the president Monday night can talk about these two very good people who both will put their best brains together and come up with a plan. But that plan, John, is 1,000 times more important than all this stimulus discussion whether it's 819, 820, 821. That's all politics. That's not jobs. But that's where I come out.

KING: I think the president would like to think it's not all politics, there are some jobs in there. But Jack Welch, what do you say -- we have about 20 seconds left -- what do you say to Republicans who say we can't afford all the deficit spending. If a bank is in a bad strait, let it fail?

WELCH: I think get the most pragmatic deal we can get. The president won the election. His party won the election. Hopefully he will play a centrist role in bringing all of us together to solve this incredible problem that in my 48 years in business I've never seen one as big. But he's got the tools and the support of the country. Grab it and fix this thing.

KING: Jack Welch, we thank you for joining us on STATE OF THE UNION today as we try to hold them accountable and track all of this money in the weeks and months ahead. We hope you'll come back quite frequently and give us a hand.

WELCH: Thanks, John.

KING: Thank you Jack, take care. We saw the president change his tone this past week. Don was the attempt to court the opposition. Democratic strategist James Carville and Republican political veteran Ed Rollins on the art of negotiations and more, up next.

(COMMERCIAL BREAK)

KING: At first, we saw President Obama reaching out to the Republican opposition. Then this past week, he switched from conciliatory to critic. Our next guests know what it's like to navigate the tricky waters of the presidency, Democratic strategist James Carville and Republican strategist Ed Rollins. (BEGIN VIDEOTAPE)

KING: Gentlemen, I want to start with this. At the end of the week, the president seemed to get his compromise. But at the beginning of the week, he was still dealing with the fallout over the nomination, now withdrawn of Tom Daschle to be his health and human services secretary. And listen to what he had to tell CNN's Anderson Cooper. This is a president who had to spend a lot of capital on a personnel issue.

(BEGIN VIDEO CLIP)

OBAMA: I think I screwed up. And, you know, I take responsibility for it. And we're going to make sure we fix it so it doesn't happen again.

(END VIDEO CLIP)

KING: James, you remember the rocky early days of the Clinton presidency. That's a pretty big deal, isn't it? A president having to call in the five big TV anchors and spend capital on a personnel choice when he's got so many big policy fights?

CARVILLE: Well, I think he did it pretty good. I think this week he handled himself. I think he came in on Monday, he was a lamb. And by Friday, he was like a lion. He had gotten his feet back. But you're right, it did cause him some problems. He got wrapped up in this.

But I think that Senator Daschle made the right decision by taking his name out. He did something that very few presidents do. He got out front of this thing and said he messed up. But one of the things we have to realize, he's not been in office for three weeks. They're going to announce a complete revampment of the way we're doing the banking here on Monday. The stimulus package is all but done. They got the SCHIP thing done. They got all that stuff from Gitmo done.

CARVILLE: They have dispatched envoys to the Middle East, to Pakistan. I mean, we're not three weeks away and if you look back, there is actually a lot of stuff that this administration has gotten done in a very short period of time. And I think he ended the week on a pretty good note here.

KING: Well Ed, jump in on that point. We learn a lot from new presidents in their early days and we still don't know a lot about this president, especially when it comes to executive leadership style because he came out of the United States Senate. What have we learned?

ROLLINS: Well, what we've learned -- what he's learned is you get a big house when you get the job, a big office, a big plane. You have to go up to Camp David this weekend. And you got to sit in the presidential box. With those perks comes the toughest job of history. He's there at the toughest time, probably, than any modern president has had. I think to a certain extent, he's got to fight with his own party. He's got to fight with Republicans. The era of bipartisanship has been over for about 30 years at least. And what he's going to find is there are different viewpoints. Republicans believe in doing something one way. Democrats believe in other ways.

And he may get a couple Republicans in the Senate once in a great while, maybe those three will be the ones that will vote with him the whole way. But at the end of the day, he repeated several times this week, I won, we get to do what we want. He gets to do what he wants.

KING: Well, let's listen. I want to follow up on this point. Has he changed or can he change the tone in Washington? Let's listen to the number two Republican in the Senate, Jon Kyl of Arizona, not too happy with the president's rebuke of Republicans. Let's listen.

(BEGIN VIDEO CLIP)

SEN. JON KYL, R-ARIZ.: Discussing with the American people his approach to the stimulus of our economy, he first really used some dangerous words, I would say. So it seems to me that president is rather casually throwing out some careless language.

(END VIDEO CLIP)

KING: Rather casually throwing out some careless language in the view of that leading Republican, James Carville, essentially saying, you know, we tried your way. It didn't work. We're not going back to those policies. I understand the president's position. He did win the election. But that was not a bipartisan speech he gave to House Democrats earlier this week.

CARVILLE: I don't know what problem with it that Senator Kyl had. I was in Arizona this week and things are pretty bad in their state.

But the truth of the matter, he's done more to reach out to these Republicans and it was very interesting watching Senator Shelby just a little bit earlier on your show, John. He is against this banking thing and he hasn't even seen it.

At some point, usually they would give you the courtesy of at least looking at it and then being against it. These guys were just against it before they see it. But I think that really the president has gone a long way in trying to invite Republicans, gone over to see them, to do things like that. I don't think -- and I don't know what the president said that Senator Kyl would find offensive at all. What he said was absolute truth.

KING: Ed, I want you in on this point. But I want to add a Democratic voice to this debate about bipartisanship. The Senate comes to this compromise. They have to water the bill down a little bit, take some spending out to get a few Republicans votes. And the House Speaker Nancy Pelosi doesn't like it. She says this. "Washington seems consumed in the process argument of bipartisanship when the rest of the country says we need this bill." The president of the United States, Ed, who is a member of Speaker Pelosi's own party, says this is critical, having true bipartisanship. She says it's a process argument. Does the Democratic president have a problem with the Democratic speaker?

ROLLINS: Well, I think he does and I think to a certain extent, Democrats have waited a long time to have a president who would basically carry their agenda. But even more important, they're ready to move their own agenda forward. And this is Chairman, Nancy Pelosi, a lot of these people wanted these types of programs. They can call it stimulus or whatever at this point in time.

But it's a lot of programs that they've tried to put in in the past and they haven't been able to. Bipartisanship is a nice term. But the bottom line is there are very different viewpoints between these two parties. And Republicans feel that they weren't as responsible as they might have been on the fiscal issues during the Bush era. And now they're going to basically sit and be the watchdog and make sure that public's money is spent well.

KING: From stemming the economy free fall to the president's performance. Representative Debbie Wasserman Schultz gets "the last word" next.

(COMMERCIAL BREAK)

KING: The United States Capitol there on a beautiful Sunday morning here in Washington -- 37 lawmakers, critics and analysts have made the rounds this morning on the Sunday talk shows. Democratic Congresswoman Debbie Wasserman Schultz of Florida, she gets the last word. Thank you for joining us here.

If you listen to the debate this morning, people look at this compromise the Senate brokered Friday and they say the only way to keep it intact and get a bill to President Obama by the end of this coming week is to keep that number. As you know, your speaker, many other Democrats in the House say, no. No, we don't like this bill. I think the speaker used the term violent, did violence to what you're trying to accomplish in the House. So will you come back in the House this week and say we're putting the money back in?

SCHULTZ: What we're going to come back in the House this week and do is make sure that we can apply the tourniquet to the gash that has been busted open in the economy after eight years of Republican applied leeches.

At the end of the day, the front page of "The Washington Post" said agree speed matters more than size and shape. And we're going through the normal legislative process, the give and take, and ensure that we can invest in our nation's infrastructure.

KING: But if speed matters more than size or shape, to use the headline you just read, why doesn't the House say you know what, we don't like this, we thought ours was better, but we will accept it because then we can get a bill to the president on Wednesday or Thursday. SCHULTZ: Well, we know that we crafted a bill that includes the priorities of the American people to ensure that we can get them working again. Investing in our nation's infrastructure, roads and bridges, making sure that we can rebuild schools. Establishing a streamline health care system so we can computerize medical records and reduce health care costs. We have to get aid to states to avoid layoffs and teachers and firefighters and police officers.

Those are the kinds of investments that need to be made to ensure that we can get this economy turned around. Now that's 90 percent of both bills. We've got about a 10 percent difference. And we're going to make sure that we negotiate over that last 10 percent and pass a bill that can get the economy turned around and send it to the president.

KING: So you won't take the Senate bill. You will insist in the House on putting some of that spending back in.

SCHULTZ: The founding fathers created a legislative process that also created the conference committee and we're going to go through the conference committee and the appropriations process this week, come out with a good product that will help get the economy turned around.

KING: As you know, the new president came to town promising a new era of bipartisanship. Eight years of George W. Bush, eight years of Bill Clinton, not much true bipartisanship in this town. Your speaker after the Senate compromise was reached on Friday, made clear she doesn't like it. She said this, "Washington seems consumed in the process argument of the bipartisanship when the rest of the country says they need this bill."

The process argument of bipartisanship. The president said it is a critical spirit to have in this town. Your boss in the House, the speaker, doesn't seem to think it's important.

SCHULTZ: On the contrary, Speaker Pelosi has made bipartisanship and reaching out in the Republicans in the House a priority. We made sure that we had markup after markup in committee this week and in the last few weeks which included Republican amendments that we heard, that some that we accepted.

SCHULTZ: We reached out our hand across the aisle, asked them to help craft this legislation. That was rejected. So we have made an effort at reaching out our hand across the aisle. They really seem to be more interested in making sure that this whole process fails. It's really baffling to me why they don't want to pass an economic recovery package. They'll have to answer the American people as to why that is.

KING: Well, one of your colleagues on the Republican side, the one -- one of the ones who disagrees with you, Mike Pence, was out this morning and he says this plan is horrible. Let's listen.

(BEGIN VIDEO CLIP) PENCE: The Senate piece of any effective stimulus bill that's ever been passed by Congress in the recent past has been tax relief. The center of this stimulus bill is massive, unaccountable government spending. And the American people are tired of it.

(END VIDEO CLIP)

KING: You're shaking your head. But if you had to add some tax cuts to take up some spending to get it palatable, to get three, just three Republican votes over in the Senate. I'm going to ask you the last question on this one. I know you disagree with Congressman Pence. But will you accept the current mix if that is the only way to get a bill to the president this week?

SCHULTZ: Well, that is predictable criticism from my friend Mike Pence. But the bottom line is that we've had eight years as the president said of doing it their way through pure tax cuts.

We have to have the right mix of tax cuts that go targeted to the middle class, like President Obama's tax cut that would go to 95 percent of Americans that we included in the House bill. We're going to have a balance, the right balance of tax cuts and spending.

But we're not going to continue to allow the middle class to twist in the wind and we're going to focus on investments and this economy that will create jobs -- 598,000 jobs lost in the last month, 2.6 million in the last year of the Bush administration. Job creation at least three to four million, those are priorities, that is the president's priority, making sure we get tax cuts targeted for the middle class. That's how we're going to get the economy turned around. KING: We'll watch the debate as it leaves the Senate, comes back your way to the House this week. Congresswoman Debbie Wasserman Schultz, thank you for having the last word with us today.

And when it's your neighbors who are out of work struggling, you see things differently. Next, an unlikely pitchman for the president, the Republican mayor of one Midwestern town who right now is rooting for Democrat Barack Obama.

(COMMERCIAL BREAK)

KING: The president turns into a sort of traveling salesman tomorrow, hitting the road to push the stimulus plan. Let's map it out on the magic wall. He'll be going out here to the state of Indiana. Right up here in northern Indiana, Elkhart County, that's where the president will be, the unemployment rate in double digits there.

If you head south from there, you come down here to Carmel. And as you can see, Hamilton County, where Carmel is, is red. That shows you John McCain carried the county and quite handedly. So as a conservative place, however, we were out there and we met a mayor, a Republican mayor, who says families in Carmel and across the state are hurting. This Republican says what his city needs now is money, help, not partisan gamesmanship.

(BEGIN VIDEOTAPE)

KING (voice-over): Carmel, Indiana, is comfortable and conservative. Small upscale city that backed John McCain last November but whose Republican mayor is at the moment rooting for Barack Obama.

BRAINARD: Government should be investing in infrastructure. That's what government is meant to do. It creates long term value. I think the stimulus plan is a good one.

KING: Sixty years ago, this was a farm community of 1,500. Now it is 80,000, affluent, but not immune to the credit crunch and housing crisis.

BRAINARD: We had over building but not nearly the extent that I've seen in other places. We've had roughly an 8 percent drop in our housing value. Again, that's not good. But it's not nearly as bad as other places in the country.

KING: Work on an ambitious new city center is under way. There is not enough of this work in Carmel and across America. Indiana's unemployment rate is more than 8 percent. Construction among the industries hurting most.

DAVE RICHTER, UNITED COUNSELING: It is basically fear, it's caution.

KING: Dave Richter's design firm has plans for dozens of new transportation projects. But most are on hold. RICHTER: The economy is bad. And so many thousands and tens of thousands of people are getting laid off. Everybody gets scared. Nobody is very comfortable with spending a lot of money and putting new things on the books.

KING: Amanda Newman knows the economy is bad because her business, consignment shop, is booming.

AMANDA NEWMAN, CARMEL CONSIGNMENT: Just a lot of new people. A lot of new people that have never even considered shopping second hand. It may be a wealthy community. But, you know, we're just regular people and a lot of people have been hit pretty hard. So it is a little scary.

KING: Jim Brainard sees stimulus money as the road back and like every mayor, has a wish list. $428 million worth of projects, new roads, a parking garage, fire trucks and more.

(on camera): Central park aquatic center. Construction of additional water slide and wave pool. There are people out there who say come on Mr. Mayor, how does that create jobs?

Well, someone who has to construct that amenity.

KING: A Republican mayor with a budge squeeze sees things very differently from most Republicans in Congress. And also differently from governors who say they should control most of the money. BRAINARD: Mayors know how to get things done. They have to deal with constituents every day of the year. And if the money were to come directly to the cities, we'll have shovels in the ground within weeks.

KING: He knows many in his conservative community are skeptical of Mr. Obama and of big spending. But this Republican mayor is at the moment, an enthusiastic pitch man for the new Democratic president.

BRAINARD: This isn't a bill that's going to put doctors and lawyers and Wall Street brokers to work. But rather a bill that's going to put people who are hurting the most to work. We just have to get some money out in the economy. We've got to get people working. And we need a confident spirit as much as anything.

(END VIDEOTAPE

KING: Our thanks to Mayor Jim Brainard and the people of Carmel, Indiana and also to those autoworkers we met just to the south in Indianapolis, sharing their anxiety with us this past week. We'll be here again next Sunday and every Sunday 9:00 a.m. Eastern for the first and last word in Sunday talk. If you missed any part of our program, tune in tonight at 8:00 p.m. Eastern. We'll showcase the best of today's STATE OF THE UNION. Until then, I'm John King in Washington. Have a great Sunday. "FAREED ZAKARIA: GPS" starts right now.